NATIONAL INSTITUTE OF TRANSPORT
DEPARTMENT OF BUSINESS AND ENTREPRENEURSHIP STUDIES
BACHELOR DEGREE IN HUMAN RESOURCE MANAGEMENT
MODULE NAME : PERFOMANCE MANAGEMENT
TASK : GROUP ASSAIGNMENT
MODULE CODE : BHU 08102
ACADEMIC YEAR : 2017/2018.
LECTURE NAME : LONDAGA IPYANA
SUBMISSION DATE : 2018
PARTICIPANTS : REGISTATION NUMBERS;
DAUD PETER MAPHIPA : NIT/BHRM/2015/214
HAFIDHI AMINA : NIT/BHRM/2015/244
LEONARD, LEONARD J. : NIT/BHRM/2015/145
NYAKI EMMANUEL : NIT/BHRM/2015/225
AMBOKILE MWAKALAPA : NIT/BHRM/2015/178
NTAUKA GEORGE W. : NIT/BHRM/2015/194
MWASANDENDE MOSES : NIT/BHRM/2015/196
QUESTION;
What is the performance appraisal? Explain traditional method and modern methods of
performance appraisal. Indentify prons and cons of each.
PERFORMANCE APPRAISAL.
Performance appraisal is the systematic evaluation of the individual with regard to his or her
performance on the job and his potential for development.
Performance Appraisals is the assessment of individual’s performance in a systematic way. It is a
developmental tool used for all round development of the employee and the organization. The
performance is measured against such factors as job knowledge, quality and quantity of output,
initiative, leadership abilities, supervision, dependability, co-operation, judgment, versatility and
health. Assessment should be confined to past as well as potential performance also. The second
definition is more focused on behaviors as a part of assessment because behaviors do affect job
results.
Objectives of Performance Appraisal
Performance Appraisal can be done with following objectives in mind
To maintain records in order to determine compensation packages, wage structure, salaries
raises, etc.
To identify the strengths and weaknesses of employees to place right men on right job.
To maintain and asses the potential present in a person for further growth and development.
To provide a feedback to employees regarding their performance and related status.
Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company which can be justified by
following advantages:
Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programmes for efficient employees. In this regards, inefficient workers can be dismissed or
demoted in case.
Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance
of employees, a person’s efficiency can be determined if the targets are achieved. This very well
motivates a person for better job and helps him to improve his performance in the future.
Performance Appraisal Methods: Each method of performance appraisal has its strengths and
weaknesses may be suitable for one organization and non-suitable for another one. As such, there
is no single appraisal method accepted and used by all organizations to measure their employees’
performance.
Traditional Method
Ranking Method: Rating scales consists of several numerical scales representing job related
performance criterions such as dependability, initiative, output, attendance, attitude etc. Each
scales ranges from excellent to poor. The total numerical scores are computed and final
conclusions are derived.
The Advantages of the rating scale is Adaptability to the peoples, easy to use, low cost, every
type of job can be evaluated, large number of employees covered, no formal training required.
Disadvantages – Rater’s biases to the system
Paired Comparison:
In this method each employee is rated with another employee in the form of pairs. The number of
comparisons may be calculated with the help of a formula as under.
In this method, the appraiser compares each employee with all others in a group one at a time.
After all the comparisons, on the basis of the overall comparisons, the employees are given the
final rankings.
Under this method the appraiser compares each employee with every other employee one at a
time. For example there are five employees named A, B, C, D and E. The performance of A is
first compared with the performance of B and a decision is made about whose performance is
better. Then A is compared with C. D and E in that order. The same procedure is repeated for
other employees. The number of comparisons may be calculated with the help of a formula
which reads thus: N (N-1)/ 2 where N stands for the number of employees to be compared. If
there are 10 employees, the number of comparisons will be 10(10-1)/2 = 45.
After the completion of comparison, the results can be tabulated and a rank is created from the
number of times each person is considered to be superior.
Field Review Method: This is an appraisal done by someone outside employees’ own
department usually from corporate or HR department. Advantages – Useful for managerial level
promotions, when comparable information is needed, Disadvantages – Outsider is generally not
familiar with employees work environment, Observation of actual behaviors not possible.
Performance Tests & Observations:
This is based on the test of knowledge or skills. The tests may be written or an actual
presentation of skills. Tests must be reliable and validated to be useful. Advantage – Tests may
be apt to measure potential more than actual performance. Disadvantages – Tests may suffer if
costs of test development or administration are high.
In this method, each employee is compared with other employees on one- on one basis, usually
based on one trait only. The rater is provided with a bunch of slips each coining pair of names,
the rater puts a tick mark against the employee whom he insiders the better of the two. The
number of times this employee is compared as better with others determines his or her final
ranking.
Grading Method:
In this method, certain categories of worth are established in advance and carefully defined.
There can be three categories established for employees: outstanding, satisfactory and
unsatisfactory. There can be more than three grades. Employee performance is compared with
grade definitions. The employee is, then, allocated to the grade that best describes his or her
performance.
Such type of grading is done is Semester pattern of examinations and in the selection of a
candidate in the public service sector. One of the major drawbacks of this method is that the rater
may rate most of the employees on the higher side of their performance.
Forced Distribution Method:
This method was evolved by Tiffen to eliminate the central tendency of rating most of the
employees at a higher end of the scale. The method assumes that employees’ performance level
confirms to a normal statistical distribution i.e., 10,20,40,20 and 10 per cent. This is useful for
rating a large number of employees’ job performance and promo ability. It tends to eliminate or
reduce bias.
It is also highly simple to understand and easy to apply in appraising the performance of
employees in organizations. It suffer from the drawback that improve similarly, no single grade
would rise in a ratings.
Forced-Choice Method:
The forced-choice method is developed by J. P. Guilford. It contains a series of groups of
statements, and rater rates how effectively a statement describes each individual being evaluated.
Common method of forced-choice method contains two statements, both positive and negative.
Examples of positive statements are:
1. Gives good and clear instructions to the subordinates.
2. Can be depended upon to complete any job assigned.
A pair of negative statements may be as follows:
1. Makes promises beyond his limit to keep these.
2. Inclines to favour some employees.
Each statement carries a score or weight, which is not made known to the rater. The human
resource section does rating for all sets of statements— both positive and negative. The final
rating is done on the basis of all sets of statements. Thus, employee rating in this manner makes
the method more objective. The only problem associated with this method is that the actual
constructing of several evaluative statements also called ‘forced-choice scales’, takes a lot of
time and effort.
Check-List Method:
Under this method, checklist of statements of traits of employee in the form of Yes or No based
questions is prepared. Here the rater only does the reporting or checking and HR department
does the actual evaluation. Advantages – economy, ease of administration, limited training
required, standardization. Disadvantages – Raters biases, use of improper weighs by HR, does
not allow rater to give relative ratings
The basic purpose of utilizing check-list method is to ease the evaluation burden upon the rater.
In this method, a series of statements, i.e., questions with their answers in ‘yes’ or ‘no’ are
prepared by the HR department. The check-list is, then, presented to the rater to tick appropriate
answers relevant to the appraisee. Each question carries a weight-age in relationship to their
importance.
When the check-list is completed, it is sent to the HR department to prepare the final scores for
all appraises based on all questions. While preparing questions an attempt is made to determine
the degree of consistency of the rater by asking the same question twice but in a different manner
However, one of the disadvantages of the check-list method is that it is difficult to assemble,
analyze and weigh a number of statements about employee characteristics and contributions
From a cost stand point also, this method may be inefficient particularly if there are a number of
job categories in the organization, because a check-list of questions must be prepared for each
category of job. It will involve a lot of money, time and efforts.
Forced Choice Method: The series of statements arranged in the blocks of two or more are
given and the rater indicates which statement is true or false. The rater is forced to make a
choice. HR department does actual assessment. Advantages – Absence of personal biases
because of forced choice. Disadvantages – Statements may be wrongly framed.
Forced Choice Method:
In this, the rater is given a series of statements about an employee. These statements are arranged
in blocks of 2 or more, and the rater indicates which statement is most or least descriptive of the
employee. Typical statements are:
1. Learns fast _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ works hard
2. Work is reliable_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ performance is a good example for
3. Absents often_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ others usually tardy.
As in the checklist method, the rater is simply expected to select the statements that describe the
rate. Actual assessment is done by the HR Department. This approach is known as the forced
choice method because the rater is forced to select statements, which are readymade. The
advantage of this method is the absence of personal bias in rating. The disadvantage is that the
statements may not be properly framed – they may not be precisely descriptive of the ratee’s
traits.
Critical Incidents Method:
The approach is focused on certain critical behaviors of employee that makes all the difference in
the performance. Supervisors as and when they occur record such incidents. Advantages –
Evaluations are based on actual job behaviors, ratings are supported by descriptions, feedback is
easy, reduces recency biases, chances of subordinate improvement are high. Disadvantages –
Negative incidents can be prioritized, forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.
In this method, the rater focuses his or her attention on those key or critical behaviours that make
the difference between performing a job in a noteworthy manner (effectively or ineffectively).
There are three steps involved in appraising employees using this method.
First, a list of noteworthy (good or bad) on-the-job behaviour of specific incidents is prepared.
Second, a group of experts then assigns weight age or score to these incidents, depending upon
their degree of desirability to perform a job. Third, finally a check-list indicating incidents that
describe workers as “good” or “bad” is constructed. Then, the check-list is given to the rater for
evaluating the workers.
The basic idea behind this rating is to apprise the workers who can perform their jobs effectively
in critical situations. This is so because most people work alike in normal situation. The strength
of critical incident method is that it focuses on behaviors and, thus, judge’s performance rather
than personalities.
Its drawbacks are to regularly write down the critical incidents which become time-consuming
and burdensome for evaluators, i.e., managers. Generally, negative incidents are positive ones. It
is rater’s inference that determines which incidents are critical to job performance. Hence, the
method is subject to all the limitations relating to subjective judgments.
Behaviorally Anchored Rating Scales: statements of effective and ineffective behaviors
determine the points. They are said to be behaviorally anchored. The rater is supposed to say,
which behavior describes the employee performance. Advantage to helps overcome rating errors.
Disadvantages led to Suffers from distortions inherent in most rating techniques
Graphic Rating Scale Method:
The graphic rating scale is one of the most popular and simplest techniques for appraising
performance. It is also known as linear rating scale. In this method, the printed appraisal form is
used to appraise each employee. The form lists traits (such as quality and reliability) and a range
of job performance characteristics (from unsatisfactory to outstanding) for each trait. The rating
is done on the basis of points on the continuum. The common practice is to follow five points
scale.
The rater rates each appraisee by checking the score that best describes his or her performance
for each trait all assigned v alues for the traits are then totaled.
Essay Method:
In this method the rater writes down the employee description in detail within a number of broad
categories like, overall impression of performance, promote ability of employee, existing
capabilities and qualifications of performing jobs, strengths and weaknesses and training needs
of the employee. Advantage It is extremely useful in filing information gaps about the
employees that often occur in a better-structured checklist. Disadvantage It its highly dependent
upon the writing skills of rater and most of them are not good writers. They may get confused
success depends on the memory power of raters.
Essay method is the simplest one among various appraisal methods available. In this method, the
rater writes a narrative description on an employee’s strengths, weaknesses, past performance,
potential and suggestions for improvement. Its positive point is that it is simple in use. It does not
require complex formats and extensive/specific training to complete it.
However, essay method, like other methods, is not free from drawbacks. In the absence of any
prescribed structure, the essays are likely to vary widely in terms of length and content. And, of
course, the quality of appraisal depends more upon rater’s writing skill than the appraiser’s
actual level of performance.
Moreover, because the essays are descriptive, the method provides only qualitative information
about the employee. In the absence of quantitative data, the evaluation suffers from subjectivity
problem. Nonetheless, the essay method is a good start and is beneficial also if used in
conjunction with other appraisal methods.
Field Review Method:
When there is a reason to suspect rater’s biasedness or his or her rating appears to be quite
higher than others, these are neutralized with the help of a review process. The review process is
usually conducted by the personnel officer in the HR department.
The review process involves the following activities: Identify areas of inter-rater disagreement.
Help the group arrive at a consensus. Ensure that each rater conceives of the standard similarity.
However, the process is a time-consuming one. The supervisors generally resent what they
consider the staff interference. Hence, the method is not widely used.
Confidential Report:
Mostly used by government departments, however its application in industry is not ruled out. Here the
report is given in the form of Annual Confidentiality Report (ACR) and may record ratings with respect
to following items; attendance, self expression, team work, leadership, initiative, technical ability,
reasoning ability, originality and resourcefulness etc. The system is highly secretive and confidential.
Feedback to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly
subjective and ratings can be manipulated because the evaluations are linked to HR actions like
promotions etc.
It is the traditional way of appraising employees mainly in the Government Departments.
Evaluation is made by the immediate boss or supervisor for giving effect to promotion and
transfer. Usually a structured format is devised to collect information on employee’s strength
weakness, intelligence, attitude, character, attendance, discipline, etc. report.
Cost Accounting Method: Here performance is evaluated from the monetary returns yields to
his or her organization. Cost to keep employee, and benefit the organization derives is
ascertained. Hence it is more dependent upon cost and benefit analysis.
Advantages of traditional methods
1. Essay Evaluation; The essay method is an affordable and effective way of appraising
employees. This method involves writing a detailed descriptive essay of the performance by the
employee’s direct supervisor or manager. The essay concentrates on describing the various
strengths, weaknesses, attitude and behaviour of the individual towards job duties. This method
is less structured and thus gives the appraiser an opportunity to explore and describe niche
qualities or shortcomings of the employee that need to be worked on. Paired Comparison
Method. This method bears more relevance and importance in startups/SMBs, which have small
teams. It compares each employee with every individual present in the same team and depending
on their comparative performance to the employee who has performed the best, appraisals are
given. It is considered reliable because it follows a systematic method of comparative evaluation.
This technique is most apt when, the organization plans on giving appraisal only to the best
employee in the team.
Rating Scale
This performance appraisal method can be used by startups and small businesses that are scaling
and are trying to set up processes in place.
• It is process-based and involves the organization to set pre- determined objectives that
employees are expected to meet.
• Individuals are then rated by their supervisors or managers.
• It is similar to the grading system that is usually followed in schools, but is effective and
systematic. Example, employees are evaluated for their skills, teamwork, communication skills,
precision (purity), etc. And they are expected to meet a basic score. If they do not meet the score
then they are sent for performance improvement training which would help them cope up (face)
with their shortcomings.
MODERN METHODS
Management by Objectives (MBO):
Most of the traditional methods of performance appraisal are subject to the antagonistic
judgments of the raters. It was to overcome this problem; Peter F. Drucker propounded a new
concept, namely, management by objectives (MBO) way back in 1954 in his book.
The Practice of management. The concept of MBO as was conceived by Drucker, can be
described as a “process whereby the superior and subordinate managers of an organization
jointly identify its common goals, define each individual’s major areas of responsibility in terms
of results expected of him and use these measures as guides for operating the unit and assessing
the contribution of each its members”.
In other words, stripped to its essentials, MBO requires the manager to goals with each employee
and then periodically discuss his or her progress toward these goals.
In fact, MBO is not only a method of performance evaluation. It is viewed by the Practicing
managers and pedagogues as a philosophy of managerial practice because .t .s a method by
wh.ch managers and subordinates plan, organize, communicate, control and debate.
An MBO programme consists of four main steps: goal setting, performance standard, compari-
son, and periodic review. In goal-setting, goals are set which each individual, s to attain. The
superior and subordinate jointly establish these goals. The goals refer to the desired outcome to
be achieved by each individual employee.
In performance standards, the standards are set for the employees as per the previously arranged
time period. When the employees start performing their jobs, they come to know what is to be
done, what has been done, and what remains to be done.
In the third step the actual level of goals attained are compared with the goals agreed upon. This
enables the evaluator to find out the reasons variation between the actual and standard
performance of the employees. Such a comparison helps devise training needs for increasing
employees’ performance it can also explore the conditions having their bearings on employees’
performance but over which the employees have no control.
Finally, in the periodic review step, corrective measure is initiated when actual performance
deviates from the slandered established in the first step-goal-setting stage. Consistent with the
MBO philosophy periodic progress reviews are conducted in a constructive rather than punitive
manner.
The purpose of conducting reviews is not to degrade the performer but to aid in his/her future
performance. From a motivational point of view, this would be representative of McGregor’s
theories.
ADVANTAGES OF MODERN METHODS
Assessment Centre Method
• The purpose of this method is to test candidates in social.
• This method of evaluation is helpful for assessing managers, who have to deal with their
subordinate, peers and supervisors for day-to-day business.
• It helps employers understand the capacity and the capability of the individual in social setting.
• It gives the employer an insight to the personality of the employee like openness, tolerance,
introversion/extroversion, acceptability, etc.
360 Degree Feedback
Management By Objectives: It means management by objectives and the performance is rated
against the achievement of objectives stated by the management. MBO process goes as under.
Establish goals and desired outcomes for each subordinate
Setting performance standards
Comparison of actual goals with goals attained by the employee
Establish new goals and new strategies for goals not achieved in previous year.
Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-
term goals rather than important and long-term goals etc.
• This method involves getting a feedback about the employee from every individual who
interacts with him during his working hours.
• They can be his peers, his subordinates, his superiors, customers who have interacted with him
and even he himself would be interviewed about his perception of himself and his duties at the
workplace.
• This performance appraisal method would be very useful for startups, because the best way to
review an employee’s overall performance and get an insight about his behaviour, personality
and attitude this is the best method to follow.
• Although it is a little time consuming, but it is cost effective and precise. It keeps biases out of
play due to multiple opinions, so that the review isn’t affected by biases of one person.
Behaviorally Anchored Rating Scale
This is latest a modern appraisal technique, which has been developed recently.
• It is claimed that the Behaviorally Anchored Rating Scale method is one of the most equitable
technique compared to other methods of appraisals.
• It is a combination of narrative techniques like essay evaluation and quantifiable techniques
like rating scale.
• It is comparatively more expensive than other techniques, but it usually guarantees precision
(purity) and effectiveness.
Advantages of Performance Appraisal Provide a record of performance over a period of time.
Can be motivational with the support of a good reward and compensation. Provide an
opportunity for a manager to meet and discuss performance. Provide an opportunity for an
employee to discuss issues and to clarity expectations. Provide the employee with feedback
about their performance.
Disadvantage of Performance Appraisal If not done appropriately, can be a negative
experience.Very time consuming. Especially for a manager. Subject to rater errors and biases. If
not done right can be a complete waste of time. Can be stressful for all involved.
Psychological Appraisals: These appraisals are more directed to assess employees potential for
future performance rather than the past one. It is done in the form of in-depth interviews,
psychological tests, and discussion with supervisors and review of other evaluations. It is more
focused on employees emotional, intellectual, and motivational and other personal characteristics
affecting his performance. This approach is slow and costly and may be useful for bright young
members who may have considerable potential. However quality of these appraisals largely
depend upon the skills of psychologists who perform the evaluation.
Assessment Centers: This technique was first developed in USA and UK in 1943. An
assessment center is a central location where managers may come together to have their
participation in job related exercises evaluated by trained observers. It is more focused on
observation of behaviors across a series of select exercises or work samples. Assessees are
requested to participate in in-basket exercises, work groups, computer simulations, role playing
and other similar activities which require same attributes for successful performance in actual
job. The characteristics assessed in assessment center can be assertiveness, persuasive ability,
communicating ability, planning and organizational ability, self confidence, resistance to stress,
energy level, decision making, sensitivity to feelings, administrative ability, creativity and
mental alertness etc.
Disadvantages; Costs of employees traveling and lodging, psychologists, ratings strongly
influenced by assessor’s inter-personal skills. Solid performers may feel suffocated in simulated
situations. Those who are not selected for this also may get affected.
Advantages; well-conducted assessment center can achieve better forecasts of future
performance and progress than other methods of appraisals. Also reliability, content validity and
predictive ability are said to be high in assessment centers. The tests also make sure that the
wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and
promotion.
360-Degree Feedback: It is a technique which is systematic collection of performance data on
an individual group, derived from a number of stakeholders like immediate supervisors, team
members, customers, peers and self. In fact anyone who has useful information on how an
employee does a job may be one of the appraisers. This technique is highly useful in terms of
broader perspective, greater self-development and multi-source feedback is useful. 360-degree
appraisals are useful to measure inter-personal skills, customer satisfaction and team building
skills. However on the negative side, receiving feedback from multiple sources can be
intimidating, threatening etc. Multiple raters may be less adept at providing balanced and
objective feedback.
Computerized and Web based performance appraisal:
Nowadays, several performance appraisal software programmes are available. These software
programmes enable managers to keep computerized notes on subordinates during the year, and
then to combine these with ratings of employees on several performance traits. The software
programmes then generate written text to support each part of the appraisal. In the traditional
Appraisal system, the paper based appraisal causes a lot of manual work, which is time
consuming, not secure and difficult to analyse the performance. Whereas Web based
performance appraisal provides an easy way to conduct appraisal.
Psychological Appraisals
Large organization employs full-time industrial psychologists. These psychologists are used for
evaluations. They assess an individual’s future potential and past performance.
The appraisal normally consists of in-depth interviews, psycho1ogical tests, discussions with
supervisors and a review' of other evaluations. The psychologists then write an evaluation of the
employee's intellectual, emotional, motivational and other-related characteristics that suggest
individual potential and may predict future performance.
The evaluation by the psychologist may be for a specific job opening for which the person is
being considered. Or it may be a global assessment of his or her future potential. From these
evaluations, placement and development decisions may be made to shape the person's career.
Human Resource Accounting Method:
Human resources are valuable assets for every organization. Human resource accounting method
tries to find the relative worth of these assets in the terms of money.
In this method the performance appraisal of the employees is judged in terms of cost and
contribution of the employees. The cost of employees include all the expenses incurred on them
like their compensation, recruitment and selection costs, induction and training costs etc whereas
their contribution includes the total value added (in monetary terms). The difference between the
cost and the contribution will be the performance of the employees. Ideally, the contribution of
the employees should be greater than the cost incurred on them.
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